FDIC Announces First–Citizens Bank & Trust Company Agreed to Assume All Deposits and Loans of Silicon Valley Bridge Bank | Practical Law

FDIC Announces First–Citizens Bank & Trust Company Agreed to Assume All Deposits and Loans of Silicon Valley Bridge Bank | Practical Law

Following the closure of Silicon Valley Bank, the FDIC has entered into a purchase and assumption agreement for all deposits and loans of Silicon Valley Bridge Bank with First–Citizens Bank & Trust Company.

FDIC Announces First–Citizens Bank & Trust Company Agreed to Assume All Deposits and Loans of Silicon Valley Bridge Bank

by Practical Law Finance
Law stated as of 29 Mar 2023 • USA (National/Federal)
Following the closure of Silicon Valley Bank, the FDIC has entered into a purchase and assumption agreement for all deposits and loans of Silicon Valley Bridge Bank with First–Citizens Bank & Trust Company.
On March 26, 2023, the Federal Deposit Insurance Corporation (FDIC), as receiver of Silicon Valley Bank (SVB), announced that it has entered into a purchase and assumption agreement with First–Citizens Bank & Trust Company (FCBT), which will assume all deposits and loans formerly with SVB.
Previously, on March 10, 2023, following a bank run where SVB customers withdrew $42 billion in a single day, the California Department of Financial Protection and Innovation closed SVB and appointed the FDIC as receiver. On March 13, 2023, the FDIC transferred all deposits and substantially all assets from SVB to a full-service FDIC-operated bridge bank, Silicon Valley Bridge Bank (SVBB) (see Legal Update, US Banking Agencies Respond to the Collapse of Silicon Valley Bank and Signature Bank).
The FDIC reported that as of March 10, 2023, SVBB had approximately $167 billion in total assets and about $119 billion in total deposits. The March 26, 2023 agreement between FDIC and FCBT includes the following terms:
  • The purchase of about $72 billion of SVBB's assets at a discount of $16.5 billion.
  • Approximately $90 billion in securities and other assets will remain in the FDIC receivership for disposition by the FDIC.
  • The FDIC received equity appreciation rights in FCBT's parent company's common stock, with an estimated stated potential value of up to $500 million.
The FDIC also reported that it entered into a loss–share transaction with FCBT on the commercial loans purchased by FCBT from SVBB under which the FDIC, as receiver, and FCBT will share in the losses and potential recoveries on the loans covered by the loss–share transaction. FCBT will assume all loan–related qualified financial contracts (QFCs).
According to the SEC Form 8-K dated March 27, 2023 filed by FCBT's parent company, the purchase and assumption agreement expressly excludes:
  • Any obligation for FCBT to purchase certain assets of SVBB formerly owned by SVB, including:
    • cryptocurrency assets or any assets backed by cryptocurrency;
    • SPD Silicon Valley Bank Co., Ltd., the China joint venture of SVB;
    • the Cayman Islands branch of SVB; and
    • the German, Canadian, and Hong Kong branches, for which FCB will receive an option to purchase.
  • Any obligation for FCBT to assume:
    • liabilities of any acquired SVBB subsidiaries not in the ordinary course of business and not reflected, or reserved for, on the SVBB’s balance sheet as of March 17, 2023; or
    • deposits denominated in cryptocurrency.
The transaction is projected to maximize recoveries on the assets by keeping them in the private sector, and is expected to minimize disruptions for loan customers.
The FDIC estimates the cost of the failure of SVB to its Deposit Insurance Fund (DIF) to be approximately $20 billion, with the exact cost to be determined when the FDIC terminates the receivership.
For more information on the FDIC's role in a bank failure, see Practice Note: The Role of the FDIC in a Bank Failure.